FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Mikrokosmos Co. prepared its annual financial statements on a calendar-year basis. In 2020, Mikrokosmos Co. experience an impairment in its inventory. Their inventories (which cost P1,320,000) only have a net realizable value of P1,100,000. As a matter of policy, they record any write-downs in inventory as part of “Loss on Inventory Writedown” (LIW) and uses an allowance account as a
A. A debit to LIW and credit to Allowance for Inventory Writedown, P170,000
B. A debit to Allowance for Inventory Writedown and credit to LIW, P50,000
C. A debit to Allowance for Inventory Writedown and credit to LIW, P170,000
D. A debit to LIW and credit to Allowance for Inventory Writedown, P50,000
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- In 2020 Fy Co. decided to change to the FIFO method for inventory . The Cost of Goods Sold in 1919 was $300,000 under LIFO. Under FIFO it would have been $250,000 . In 2020 under FIFO Cost of Goods Sold would have been $360,000 whereas under LIFO It would have been $410,000. Journalize all necessary adjusting entries for 2020.arrow_forward1. In 2021, Jules Company realized that its ending inventory was understated by P1,500 in 2019. How should Jules Company handle this? a. An adjustment to reduce inventory by P1,500 needs to be made b. An adjustment to increase cost of goods sold by P1,500 needs to be made. c. An adjustment to increase inventory by P1,500 needs to be made d. No adjustment needs to be made. 2. For interim reporting, a gain on disposal of land occurring in the third quarter is a. Recognized and allocated over the quarters b. Recognized and allocated over four quarters c. Recognized immediately in the third quarter d. Deferred until the annual reportingarrow_forwardOn January 1, 2023 , Linda Corp. changed from the average cost to the dollar value LIFO method for accounting for inventory. The change results in a decrease in ending inventory of $45,497,000 for the year. How should the effect of this change be reported by Linda Corp. in 2023? (RE& CF 1) As an increase to beginning RE of $ 45,497,000 As a decrease to beginning RE of $45,497,000 As an increase to net income of $45,497,000 As a decrease to net income of $45,497,000arrow_forward
- Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Flay decided to change to the LIFO method. As a result of the change, net income in 2021 was $76 million. If the company had used LIFO in 2020, its cost of goods sold would have been higher by $7 million that year. Flay's records of inventory purchases and sales are not available for 2019 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: ($ in millions) Net income 2018 2019 2020 $76 $78 $80 Required: 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 3. What amounts will Flay report for net income in its 2019-2021 comparative income statements?arrow_forwardFor all problems, assume the perpetual inventory: system is used unless stated otherwise. Accounting principles for inventory and applying the lower-of-cost-or-market rule Some of L and K Electronics ’s merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is $32,000 below the business’s cost of the goods, which was $98,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $410,000. Requirements Journalize any required entries. At what amount should the company report merchandise inventory on the balance sheet? At what amount should the company report the cost of goods sold on the income statement? Which accounting principle or concept is most relevant to this situation?arrow_forwardDuring 2021, P Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2019 $ 120,000 understated 2020 $ 150,000 overstated *Note any error of 2019 ending inventory is carried over to 2020 as an error of the beginning inventory. P uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, P's retained earnings at January 1, 2021, would be: O Correct. O $30,000 overstated O $150,000 overstated. O $270,000 overstated.arrow_forward
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